Wednesday, October 05, 2011

Global Price Fixing Conspiracy Claim Barred by Foreign Trade Antitrust Improvements Act

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Federal antitrust claims asserted by direct and indirect purchasers of potash—alleging a global price fixing conspiracy among producers—were beyond the subject matter jurisdiction of a federal court in Illinois, the U.S. Court of Appeals in Chicago has ruled.

The Foreign Trade Antitrust Improvements Act (FTAIA) applied to bar the suit regardless of whether the FTAIA was construed to state a jurisdictional requirement or an element of the plaintiffs’ Sherman Act claim. A federal district court’s refusal to dismiss the suit on jurisdictional or pleading grounds was vacated and remanded.

Import Commerce, Direct Effects

The lower court found that FTAIA’s "import commerce" exception applied because the defendants’ importation of potash and purported conspiracy to fix the price of potash globally created a sufficiently tight nexus between the alleged illegal conduct and the defendants’ import activities.

The lower court’s reasoning essentially conflated the FTAIA’s "import commerce" exception and its "direct effects" exception, the appellate court explained. If foreign anticompetitive conduct were deemed to involve U.S. import commerce even if directed entirely at markets overseas, then the "direct effects" exception would be effectively rendered meaningless.

Reading the FTAIA to mean that a foreign company doing any import business in the United States would violate the Sherman Act whenever it entered a joint-selling arrangement overseas—regardless of its impact on the American market— "would produce the very interference with foreign economic activity that the FTAIA seeks to prevent," according to the appellate court.

The complaint contained no factual allegations to support application of the import commerce exception, the appellate court said. Its specific allegations described anticompetitive conduct aimed at the potash markets in Brazil, China, and India—not the U.S. import market.

The general assertion that the defendants "conspired to coordinate potash prices and price increases so as to fix, raise, maintain, and stabilize the price at which potash was sold in the United States at artificially inflated and anticompetitive levels" was wholly conclusory and insufficient to satisfy the pleading standards established by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly (2007-1 Trade Cases ¶75,709) and Ashcroft v. Iqbal (2009-2 Trade Cases ¶76,785).

Overseas, Domestic Prices

Moreover, the connection asserted in the complaint between the alleged cartelized prices of potash overseas and the domestic price of potash was too speculative and indirect to state an actionable claim under the FTAIA’s "direct effects" exception, the court stated. The complaint’s general allusion to a link between the prices in the Brazilian, Chinese, and Indian markets and American potash prices was insufficient on its own to permit a plausible inference of direct effects.

The "cryptic" chain-of-events allegation offered by the plaintiffs relied on too many intervening variables to support application of the direct effects exception.

The decision is Minn-Chem, Inc. v. Agrium Inc., 2011-2 Trade Cases ¶77,611.

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